After weeks of uncertainty, interest rates lowered

THE CENTRAL Bank of Cyprus on Monday announced a reduction of its maximum deposit rate for commercial banks by one per cent, in hopes that this will encourage them to lower their own interest rates.

“The CBC, having considered the governor’s prior consultations on this matter with representatives of the banks, is certain that credit institutions will proceed to commensurate reductions in lending rates promptly,” an announcement said.

The Central Bank left a window open for further measures to combat the problem of extremely high lending rates by Cypriot banks.

“The CBC will closely monitor the trajectory of lending rates and, if necessary, will consider adopting additional measures in future,” the statement warned.

The announcement came after a string of meetings Governor Chrystalla Georghadji had with the heads of major local banks – Bank of Cyprus (BoC) CEO John Patrick Hourican and Hellenic Bank director Bert Pijls – who pledged to support the CBC’s efforts to lower interest rates.

Indeed, minutes after the CBC’s statement, the Bank of Cyprus – the island’s largest lender – announced it was lowering its interest rates by one per cent across the board.

“The Bank of Cyprus announces the lowering of all basic interest rates by one per cent, with no exceptions,” it said in a statement.

“The benefit will relate to all active loans connected with the bank’s basic interest rate.”

The BoC said the move will impact 180,000 accounts belonging to 94,000 customers who will incur a total benefit of €5.7 million in the form of lower loan repayments.

Additionally, it said, non-performing loans being serviced will incur an additional benefit of 2 per cent.

Last week, the Co-operative Central Bank announced a one per cent reduction in serviced mortgages, a month after it had done the same with agricultural and student loans.

The issue of high lending rates – the cost of money – has been the object of heated political debate for months, as it had been considered a major barrier to restoring economic activity.

Last month, Georghadji told the House that rate reductions would be forthcoming “within two weeks”, but a CBC spokesman was on state radio the next day arguing that her remarks were misinterpreted, and that a committee of experts would prepare proposals for the CBC board within a fortnight.

This back-and-forth created some uncertainty, but Monday’s announcement – coupled with private conversations with bank heads – appear to have yielded the much-anticipated results.

Deputy government spokesman Victoras Papadopoulos welcomed the CBC’s move, saying the rate reduction was a government goal for 2015.

“The government feels that following the Co-operative Central Bank’s lowering of lending rates for agricultural, student, and housing loans, [Monday’s] decision is an initial positive step towards further reductions of interest rates in Cyprus, thus creating the conditions to expedite a return to growth, while easing the burden on households and businesses,” the deputy spokesman’s statement read.

Could I have a one percent off my loan interest, please? Hellenic raised the interest by this one percent 3 years ago blaming ‘high deposit interest rates’.

Denis McLean

Call me Mr Thick, but all those with NPLs and primary mortgages will never again be able to borrow a cent in the future. Those who went guarantor and wriggle out of their obligations will be in the same boat. So, please tell me who in the future will the banks trust with savers money!

Alexander Reuterswärd

I am impressed by the implementation of the banks, now it is up to the people and the companies to start paying 😉

Victor Law

Judging by the number of debtors who don’t pay their debts they should just lower the rates straight into the ground, just bury them forever. It would have the same effect.

By continuing to use the Cyprus Mail, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.